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Barron's Features

The Next Big Thing

By

Fleming Meeks

Updated Nov. 12, 2001 12:01 a.m. ET

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Killer applications are few and far between in the personal computer industry. The last one was the Internet. The next one will be the wirelessly networked home. And make no mistake about it, wireless home networks will drive PC sales to new highs and initiate a new round of spending on all manner of peripherals, including home networking gear from Linksys, Netgear and
Lucent Technologies.
The ability to work with your notebook PC anywhere in your house, not to mention in airports and hotel rooms and offices where a wireless network is present, will so dramatically increase the functionality of the PC that computer users will embrace it, despite the cost which, by the way, is dropping almost every day.

But it's not happening yet -- a fact that will disappoint those who believed the hype about
Microsoft
XP being the Holy Grail for home networking. Throughout the summer, anticipation grew about wireless networking, which is built around a technical specification, alternately known as 802.11b and WiFi. The Web-based magazine Connected Home declared, "Using Windows XP to set up a WiFi wireless network is mindlessly simple -- you just plug in the hardware, and it finds the network."

And in a visit with Barron's editors in late July,
Gateway
CEO Ted Waitt, too, spoke expansively about home networking as a driver for the PC business. He noted that a PC equipped with Windows XP would allow home users to hook up easily with other computers, including those without XP -- even with
Apple Computer's
Macintoshes.

It sounded too good to be true. But the will to believe is great, especially for unskilled technophiles like me. Three years ago I hired a local consultant to help me connect two iMacs at opposite corners of my house to a single cable modem, so I already knew the perils of setting up the most rudimentary home network -- and they went far beyond drilling through the dense plaster and lath in the walls of my 98-year old house and running the wires. Among other things, I learned to pay close attention when the experts burrow deep into the software's setup protocols. When the whole thing later broke down, I had to reset it myself.

Now, it seemed, I could avoid all that aggravation. Since I was already planning to buy two new PCs when XP was released, a wireless network, I figured, would be an added bonus.

I called Gateway for recommendations on home-networking gear, and though the advance word was that setting up a network was a breeze, I jumped at the offer when the company volunteered to come to my home and do it for me. I then bought two new Gateway PCs -- a notebook and a desktop -- and the requisite networking gear.

Home networks have been around, in commercial applications, since the mid-1990s. Some run over telephone wires, others through electrical wires. But most are connected by cabling, a standard feature of most new homes. According to Michael Wolf, director of research at In-Stat, a Scottsdale, Arizona, consulting firm, there are currently 6.5 million home networks in North America, most of which are used primarily for sharing Internet access. By 2006, Wolf, author of the recently published Speed! Understanding and Installing Home Networks, expects that number to grow more than fourfold, to 29.6 million home networks. And 35%-40% of those networks will be wireless, compared with 10%-15% right now, he says.

In pure dollar terms, the market for home networking equipment is expected to grow to $9.2 billion in 2006 from $1.4 billion this year, even as the cost of the equipment declines dramatically. Wolf notes that the cost of connecting three PCs over a wireless network today is about $400, down from $1,000 a year ago, mainly because manufacturers such as privately held Linksys, now the largest player in the industry, have been slashing prices to gain market share from established corporate-network players like
3Com
and
Cisco.

More significant, cable companies are poised to enter this market in a big way, installing home networks much as they install cable boxes and Internet modems today -- and charging for them, as well as for premium services such as security against hackers, on a monthly basis. The phone companies, too, are looking to provide home-networking services to digital-subscriber-line customers.

But while
AOL Time Warner's
Time Warner Cable and
AT&T's
AT&T Broadband are said to have test systems up and running, the key to a mass rollout will be the ability to service home networks from the local cable plant -- the headend, in industry argot -- rather than by sending out a truck every time a printer on a home network won't print. "If you can manage it from the headend, that's the jewel," says Rouzbeh Yassini, who heads up the home networking group at CableLabs, a research consortium funded by the cable companies. "That's the most important part."

Now, however, the cable companies won't even take your call if you have a question about a home-network problem. And until they can reach the point where home-networking revenues outstrip the support costs and associated headaches, they're not likely to start.

None of this was apparent -- at least to me -- at 2 p.m. on October 16, when two young men in crisp white button-down shirts with the Gateway logo, pressed navy slacks and well-shined black shoes showed up at my door to set up my home network. They began by hooking up the network equipment, beginning with the "residential gateway," which attaches to the cable modem and routes the wireless signal throughout the house. Then they hooked up a wireless "access point" to my desktop computer. This is a nifty little piece of hardware that instructs my PC to communicate between the residential gateway and the desktop. (Gateway also sent a wireless network card for the notebook computer, which I somehow managed to misplace.) The residential gateway was an Orinoco RG-1000, which sells for between $200 and $250. The wireless access point, an Orinoco USB Client Gold, costs another $150 or so. (Check Cnet.com for current prices.) Wireless network cards can be found for less than $80, down from $200 a year ago.

The folks at Gateway said the Orinoco equipment, which is made by Lucent, was selected because it offers slightly better security than lower-priced equipment from the likes of Linksys and Netgear. According to the literature that came with these devices, the signal between them should carry for up to 1,750 feet, or about a third of a mile -- good for setting up a sprawling network, but not so good for keeping intruders out.

Yet what happened next was eerily familiar. Though Windows XP performed admirably on the setup, registering a signal from the residential gateway immediately, it was unable to reach beyond the router to grab the necessary information from the cable modem. Indeed, the Gateway guys soon were on the phone with Comcast trying to track down the IP address and the DHCP and DNS numbers -- Internet protocol address, dynamic host configuration protocol and domain-name server numbers, to the uninitiated -- with seemingly as little luck as I'd had in the course of my earlier iMac fiasco. (Last week Comcast replaced my three-year-old leased cable modem with a new one that automatically drew this information from the cable line and deposited it in my computer.)

By the time the Gateway guys left at 8 p.m., the wireless connection to the desktop computer was up and running and e-mail addresses had been set up for my wife and me. The notebook, through no fault of their own, was not connected because of the wayward card. (It later connected immediately when a new card was plugged in.) But the iMacs remained hopelessly isolated from the network because, as I soon learned from the folks at Apple, they predated November 1999, when the company began shipping all of its computers factory-equipped for wireless.

But all was not as well as it seemed. As soon as I moved the notebook computer out of the room with the residential gateway, the signal strength, displayed by five bars on the PC's screen, began to deteriorate. By the time I got to the second floor, the signal was down to two bars. And before I got to the bottom of the stairs on the ground floor, it was gone. An 802.11b signal might travel 1,750 feet over open terrain, but it's no match for early 20th century construction.

Ultimately, I connected the cable modem back into my old wired network, then attached the residential gateway to the other end, which is in a room directly over the kitchen. The notebook computer below picked up the signal and we were off and running.

Cablelab's Yassini says that none of these problems are surprising because the standards that would make hooking up a wireless network as easy as connecting a PC and a printer are not yet in place. "It took 10 years for networking to penetrate Corporate America," he says. "Between 1970 and 1980, there were 40 different networking standards." It wasn't until Ethernet emerged as the dominant standard in 1983 that corporate networks took off.

The same thing, Yassini says, is now occurring in home networking. While the world has settled around a single standard for transmitting wireless signals -- 802.11b -- the hardware components that make the network go all seem to speak separate dialects if not languages.

"The basic network settings are a challenge for a lot of folks," says Tim Price, director of marketing for Windows XP. "Every device outside the PC has its own way of setting up. And each assumes it's the only device on the network that manages network addresses." In other words, it's an electronic turf battle and the user is the loser.

But help, says Price, is on its way in the form of a new standard called Universal Plug and Play, to which all the makers of the devices that hang off the network -- printers, scanners and music players -- as well as the network equipment itself, ultimately will conform. Indeed, the Universal Plug and Play Forum has more than 400 members, from Microsoft to
Sony
to
Radio Shack.
All know that the faster a single hardware standard that makes hooking up a network as easy as hooking a printer to a PC is adopted, the faster goods and services will start flying off the shelves of mass marketers like
Wal-Mart
and
Best Buy.

Mark Lee, who chairs the marketing committee for the UPnP Forum, says that residential gateways based on the group's standard, from companies such as Linksys and Netgear, are scheduled to hit the market before Christmas. "A year from now if you're selling Internet gateway devices and your product is not UPnP enabled, you won't be competitive," he says. By that he means that the support costs for the folks who are selling and installing home networks will be prohibitively high.

Gateway, which is looking to the services business to re-energize the company's growth, is keeping a sharp eye on the matter. Mike Flanary, head of communications solutions at Gateway, says the company plans to start installing wireless home networks in some markets later this month, though pricing has not yet been set. "The price point will be market-driven," he insists.

But clearly there are more bugs to work out. When I tried to connect a printer to the network and set up file-sharing between the two PCs, the network blew up again, and the only way I could get back on the Internet was to connect the cable modem directly into my desktop PC. Hours on the phone with Gateway's extremely patient tech-support staff followed, but I was unable to get things up and running again. On Thursday, the guys from Gateway came back, made a few quick changes to the settings in the two computers, and the network was running flawlessly. In the meantime, I'm beginning to feel a bit like a guinea pig for the company's new service offering.

As for my iMacs, they've been relegated to the status of stand-alone game players for my two boys. Apple did loan me a new iMac and the necessary equipment to connect it into the network, but time ran out before I could set it up. And though my new mantra on networking claims is "trust, but verify," I'm reasonably confident that it will work. After all, Apple introduced the first affordable commercial home wireless networking package, known as AirPort, in the summer of 1999. Thanks to the company's tight control of hardware and software standards, it has, by all estimates, worked exceedingly well. (I opted to convert my home to PCs largely because that's what we use at Barron's.)

Indeed, Greg Joswiak, Apple's senior director of hardware product marketing, says that sales of Apple's iBook notebook computers into the company's core education market tripled in the quarter ended September 30, over already strong sales in the same period a year earlier. "AirPort was a huge part of it," he says. "Wirelessly networked portables is the future of technology in schools."

Wireless networks are also taking hold in corporate campus environments -- particularly at high-tech firms like Intel and Microsoft. Portable devices, be they notebook computers or handheld computers, automatically connect to the WiFi network as soon as you walk in the door. Hotels chains such as Sheraton and Hilton are installing wireless networks in their facilities, which travelers will be able to connect to for a fee. Airports like Dallas/Fort Worth and San Jose International have installed them, as have many of American Airlines' Admirals Clubs. And Starbucks, which has WiFi networks in more than 500 stores, plans to increase that number at least threefold by the end of 2003.

But the home is the hurdle that wireless networks must cross before the market truly explodes, reinvigorating sales of PCs and handheld computers and creating a fresh demand for devices like wireless jukeboxes, which will play music stored on your PC in any room of your house.

For those who want to set up a wireless network, the best bet might be to wait for UPnP to kick in before trying to do it yourself. Or you can check with local hardware vendors, including Gateway if it has a store nearby, about getting someone to do the work for you. The guy who installs your cable modem might even offer to do it as a side job.

Also, check with your broadband supplier about plans to offer home networking along with broadband service.
SBC Communications
and
Earthlink
both offer home-networking services to DSL customers, which connect PCs over home phone lines. And AT&T Broadband currently sells Linksys wireless network hardware, with Linksys offering tech support over the phone.

What's more, both AT&T Broadband and Time Warner Cable appear poised to roll out home-network services, though neither would comment on specific plans or pricing.

Clearly there's money to be made in this business. The only question is when.

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